Doctors are breathing a collective sigh of relief because we again escaped a cut in Medicare payments. But this whole recurrent charade underscores, once again, the unresolved issue of how to pay doctors. The fiscal cliff rescue included the usual "doc fix" — an override of the 27 percent Medicare reimbursement cut required by the Sustainable Growth Rate (SGR) law this year. That law has dictated annual cuts in Medicare reimbursement, which have been overridden by Congress annually. Nevertheless, this escape only postponed the crisis for older patients for another year. Moreover, the budget correction required by overriding the SGR seems to have been largely funded by lowering hospital payments instead — also perhaps bad for patients.
It may be that we physicians are paid enough, or at least nearly so. But there is no objective way to calculate reasonable compensation for physicians. After all, what doctors do — preserving health and saving lives — is, in a sense, priceless. Unfortunately, the proposed Medicare cut, annually negated by Congress, has resulted in annual medical mini-fiscal cliffs.
Luckily, there may be a practical, dependable alternative to such incalculable, arbitrary attempts to save on the country's medical care costs.
Soon after the SGR issue was settled this month, a huge health care budget earthquake occurred when several major insurers announced that premiums would be raised by up to 20 percent. True, rebates may ultimately be required by Obamacare. Regarding that, stay tuned for their calculations of executive salaries and profits. Eluding rebates at year's end will have a much bigger budget impact than the fate of the SGR physician payment cut.
Even aside from the annual SGR-induced attempts to cut Medicare payments, the present Medicare baseline calculation for physician payment is ineffective, requiring fixes by a panel of doctors. This system may have helped the budget for a few decades, but it is not the answer. Doctors' reimbursements, on average, have been decreasing slightly relative to the cost of living, with the midlevel annual income in 2011 of $203,000 for primary care doctors (although up to twice that for specialty doctors — before malpractice premiums). You may think these salaries should be lower, regardless of the even higher earnings of health care business executives.
Nevertheless, using the annual arbitrary Medicare cut in this deteriorating situation has not only been unsuccessful politically — the SGR also fails to target only the areas mainly responsible for increases in billing. The calculation includes cutting payments for basic patient care, which are not rising much. Some physician businesses, including outpatient tests and procedures, are subject to costly and risky overuse. Moreover, these charges are increasing more rapidly. It would be more reasonable for the SGR to target just these less-critical business reimbursements.
In the presently adversarial fee-for-service system, doctors feel justified in their efforts to get whatever they can from both government programs and private insurance. The federal response is understandable. It is partly a response to the finding that in regions with more doctors and hospitals, more medical services are billed, with no evident health benefits. The SGR is a way to offset these unnecessary reimbursements. It has also served as a convenient fiction to support annual budget proposals. Since the override by Congress cannot be predicted in advance, the reduction is included in health care budget predictions — even though Congress always blocks the cut.
Nevertheless, even if not blocked by Congress some year, the way those annual proposed cuts are calculated is weak as a national cost control. They govern only a small fraction of the Medicare budget. Most critically, the system is harmful to core practitioners and those restraining care to what is necessary. As noted above, those key services and appropriate behaviors are caught up in this same federal dragnet as medical business reimbursements. Moreover, total payments to physicians are a small fraction (20 percent in 2011) of overblown U.S. health care costs.
Medicare has shown that attempts at "pay for performance" — paying for paperwork showing compliance with quality — do not incentivize doctors. Surprisingly, New York City recently announced a similar proposal, which promises little better. Fortunately, a key alternative to these unrealistic ideas is emerging.
With the Affordable Care Act's emphasis on clinical quality, doctors in the American Medical Association, American College of Surgeons, the American Board of Internal Medicine and other medical associations have begun to show that realistic cost control can be provided by improving clinical decisions. Through providing the right care and eliminating unnecessary care, doctors can have reliable, relatively realistic incomes; Congress will realize savings; and we can heave a final sigh of relief upon the demise of this annual charade.
James Burdick is professor of surgery at Johns Hopkins University School of Medicine. His email is jburdic1jhmi.edu